US OFFICE PRODUCTS CO
8-K, 1998-09-21
CATALOG & MAIL-ORDER HOUSES
Previous: FIRST OF AMERICA BANK-MICHIGAN NA, 8-K, 1998-09-21
Next: EQUALNET HOLDING CORP, 8-K, 1998-09-21



<PAGE>

                    U. S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT


     PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


                               September 15, 1998
                Date of Report (Date of earliest event reported)



                          U.S. OFFICE PRODUCTS COMPANY
             (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>

<S>                                            <C>                                <C>
               Delaware                               000-25372                               52-1906050
    (State of other jurisdiction of            (Commission File Number)           (IRS Employer Identification No.)
            incorporation)
</TABLE>

   1025 Thomas Jefferson Street, N.W., Suite 600 East, Washington, D.C. 20007
          (Address of principal executive offices, including Zip Code)


                                 (202) 339-6700
              (Registrant's telephone number, including area code)



<PAGE>





ITEM 5.   OTHER EVENTS

Option Replacement Program

                  The Board of Directors of U.S. Office Products Company (the 
"Company") has approved a program intended both to reduce the potential 
long-term dilutive impact on stockholders of existing stock options and to 
provide employees with a more meaningful equity-based incentive arrangement. 
This program will allow holders of options issued pursuant to the Company's 
employee stock option plans, if they choose, to have their existing options, 
whose exercise prices are substantially below the current market price, 
replaced with a significantly smaller number of options priced at market. If 
option holders participate fully in this program, the result will be a 
significant reduction in the total number of options outstanding. The program 
is expected to begin within the next few weeks, and employees are expected to 
have approximately two to three weeks to decide whether to participate.

                  The number of new options will be determined so that the
"Black-Scholes" value of the options received will be approximately equal to the
Black-Scholes value of the options surrendered.

                  As the Company has previously disclosed, the Company is not 
able to grant additional options at this time because the Company's primary 
stock option plan prohibits additional grants to be made if such additional 
grants would cause the total number of shares covered by stock options issued 
under the plan and outstanding to exceed 20% of the total shares outstanding. 
The total number of shares covered by stock options currently outstanding is 
slightly more than 20% of the Company' outstanding shares. If a significant 
number of employees elect to participate in the program, the number of shares 
subject to employee stock options will drop well below 20%. The Company 
expects that this will allow it to provide a meaningful equity-based 
incentive program for employees while keeping the percentage of the Company's 
fully diluted equity that is represented by stock options at a reduced level.

Amendment to Bank Credit Agreement

                  The Board of Directors has approved an amendment to the 
Company's Bank Credit Agreement (the "Agreement"). The Amendment permits the 
Company to repurchase up to $50 million worth of the Company's equity 
securities, including its common stock. The Amendment also permits the 
Company to engage in asset sales in fiscal years 1999 and 2000 in amounts in 
excess of the $20 million limit set forth in the Credit Agreement, but 
requires that all of the net cash proceeds received in connection with asset 
sales exceeding the $20 million limit be applied to reduce the term loans 
under the Credit Agreement. The Amendment permanently reduces the revolving 
credit commitments under the Credit Agreement, effective March 31, 1999, by 
$50 million (or, if the revolving credit commitment has been reduced by other 
actions specified in the

<PAGE>



Credit Agreement, by an amount equal to the difference between $50 million 
and the total of such other reductions). The Amendment further prohibits the 
Company from borrowing more than $200 million under the revolving credit 
facility before March 31, 1999. As of September 18, 1998, the Company had 
approximately $31.5 million outstanding under the revolving credit facility.

                  The Board of Directors has not taken any action to approve any
repurchases of its common stock.

                  The Amendment is filed as an exhibit to this Report on Form
8-K.

ITEM 7.   FINANCIAL STATEMENTS AND EXHIBITS

                  The exhibit index is incorporated herein by reference.



                                   SIGNATURES


                  Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized.


                                           U.S. OFFICE PRODUCTS COMPANY
                                           (Registrant)



                                     By:   /s/  Thomas Morgan
                                        ---------------------------------------
                                             Thomas Morgan
                                             President and  
                                              Chief Executive Officer


DATED:  September 21, 1998



<PAGE>



                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>

EXHIBIT
    NO.                                            EXHIBIT
<S>                                 <C>


 99.1                               First Amendment dated as of August 21, 1998
                                    to the Credit Agreement dated as of June 9,
                                    1998 among U.S. Office Products Company,
                                    Blue Star Group Limited, the several banks
                                    and other financial institutions from time
                                    to time parties to the Credit Agreement,
                                    Bankers Trust Company as Syndication Agent,
                                    Merrill Lynch Capital Corporation as
                                    Documentation Agent, and The Chase Manhattan
                                    Bank as Administrative Agent.
</TABLE>


<PAGE>

                                                                               1

                                                                    Exhibit 99.1



                                 FIRST AMENDMENT


                  FIRST AMENDMENT, dated as of August 21, 1998 (this
"Amendment"), to the Credit Agreement (the "Credit Agreement"), dated as of June
9, 1998, among U.S. OFFICE PRODUCTS COMPANY, a Delaware corporation (the
"Borrower"), BLUE STAR GROUP LIMITED, a New Zealand corporation ("Blue Star
Group"), the several banks and other financial institutions from time to time
parties to the Credit Agreement (the "Lenders"), BANKERS TRUST COMPANY, a New
York banking corporation, as syndication agent (in such capacity, the
"Syndication Agent"), MERRILL LYNCH CAPITAL CORPORATION, a Delaware corporation,
as documentation agent for the Lenders hereunder (in such capacity, the
"Documentation Agent") and THE CHASE MANHATTAN BANK, a New York banking
corporation, as administrative agent for the Lenders hereunder (in such
capacity, the "Administrative Agent").


                              W I T N E S S E T H :


                  WHEREAS, pursuant to the Credit Agreement, the Lenders have
agreed to make, and have made, certain loans and other extensions of credit to
the Borrower; and

                  WHEREAS, the Borrower has requested, and upon the
effectiveness of this Amendment, the Lenders have agreed, that certain
provisions of the Credit Agreement be amended or waived upon the terms and
conditions set forth below to allow the Borrower to (i) make Asset Sales in
excess of $20,000,000 in the aggregate in each of the 1999 and 2000 fiscal years
and (ii) repurchase up to $50,000,000 of common stock of the Borrower; and

                  WHEREAS, in consideration of the amendments provided for
herein, the Borrower is willing to reduce the Revolving Credit Commitments by up
to $50,000,000 as provided for herein;

                  NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the parties hereto agree as follows:

                  SECTION 1. Defined Terms. Terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement. Unless otherwise indicated, all Section and subsection references are
to the Credit Agreement.

                  SECTION 2. Defined Terms. Subsection 1.1 is hereby amended by
adding the following language after the word "credits" in item (g) of the
definition of "Consolidated EBITDA": 

                  "(other than any gain realized in connection with a 
Permitted Receivables Securitization)",

<PAGE>


                                                                               2



provided, however, that the foregoing shall not apply to a determination of the
Leverage Ratio for use in computing the Applicable Margin.

                  SECTION 3. Amendment of Subsection 8.1(b). Subsection 8.1(b)
is hereby amended by (a) deleting the word "second" which erroneously appears in
the last line of each of the second, third, fourth, fifth and sixth Test Periods
and (b) substituting therefor, in each case, the word "third".

                  SECTION 4. Amendment of Subsection 8.6(g). Subsection 8.6(g)
is hereby amended by (a) deleting such subsection in its entirety and (b)
substituting therefor the following:

                           "(g) (i) any sales or other Dispositions by the
                  Borrower or any of its Subsidiaries of any property the Net
                  Cash Proceeds of which do not exceed $20,000,000 in the
                  aggregate per annum and the non-cash portion of which does not
                  exceed 25% of the consideration therefor; provided that in the
                  case of any such Asset Sale an amount equal to 100% of the Net
                  Cash Proceeds of such sale less the Reinvested Amount with
                  respect thereto is applied in accordance with subsection
                  4.4(c); and

                           (ii) any sales or other Dispositions by the Borrower
                  or any of its Subsidiaries of any property in the 1999 or 2000
                  fiscal year of the Borrower of which the non-cash portion of
                  each of such sales or other Dispositions does not exceed 25%
                  of the consideration therefor, provided that in the case of
                  any such Asset Sale, an amount equal to 100% of the Net Cash
                  Proceeds thereof (without any deduction for any Reinvested
                  Amount in respect thereof) is applied in accordance with
                  subsection 4.4(c)."

                  SECTION 5. Amendment of Subsection 8.7. Subsection 8.7 is
hereby amended by (a) deleting the word "and" at the end of paragraph (c)
thereof, (b) deleting the period at the end of paragraph (d) thereof and
substituting therefor "; and" and (c) adding the following paragraph (e)
thereto:

                           "(e) so long as no Default or Event of Default shall
                  have occurred and be continuing or would result therefrom,
                  payments by the Borrower to repurchase or otherwise acquire
                  Capital Stock of the Borrower (including any options, warrants
                  or other rights in respect thereof) not otherwise permitted by
                  the preceding clauses of this subsection 8.7, from Persons
                  other than CD&R, CD&R Fund V and CDR-PC Acquisition in an
                  aggregate amount not to exceed $50,000,000."

                  SECTION 6. Amendment to Subsection 8.9(k). Subsection 8.9(k)
is hereby amended by deleting "20%" in the fourth line of the paragraph and
substituting therefor "25%" in order to make subsection 8.9(k) consistent with
subsection 8.6(g).



<PAGE>


                                                                               3



                  SECTION 7. Revolving Credit Reduction. In consideration of the
execution and delivery of the Amendment by the Required Basic Lenders, the
Borrower hereby irrevocably and unconditionally (a) gives notice of a reduction
on March 31, 1999 in the Revolving Credit Commitments pursuant to subsection 2.4
by the amount equal to $50,000,000 minus the Net Cash Proceeds received on
account of any Permitted Receivables Securitizations and Asset Sales during the
period from the date hereof to and including March 31, 1999 that, in each case,
is accompanied by an equivalent reduction in the Revolving Credit Commitments or
prepayment of the Tranche A Term Loans pursuant to subsection 4.4 and (b) agrees
that until such date (or, if earlier, the date on which the aggregate of such
reductions in the Revolving Credit Commitments and prepayments of the Tranche A
Term Loans equals $50,000,000) it will not borrow Revolving Credit Loans or
Swing Line Loans or request Letters of Credit to be issued under the Revolving
Credit Commitments if as a result thereof the Aggregate Outstanding Revolving
Credit will be greater than $200,000,000.

                  SECTION 8. Representations and Warranties. After giving affect
to this Amendment, the Borrower hereby confirms, reaffirms and restates in all
material respects the representations and warranties set forth in Section 5 of
the Credit Agreement as if made on and as of the date hereof except for any
representation or warranty made as of the earlier date, which representation or
warranty shall have been true and correct in all material respects as of such
earlier date.

                  SECTION 9. Conditions to Effectiveness. This Amendment shall
become effective upon receipt by the Administrative Agent of counterparts of
this Amendment, duly executed and delivered by (a) the Borrower and Blue Star
Group, and (b) the Required Basic Lenders.

                  SECTION 10. Payment of Expenses. The Borrower agrees to pay or
reimburse the Administrative Agent for all of its reasonable out-of-pocket costs
and expenses incurred in connection with this Amendment, any other documents
prepared in connection herewith and the transactions contemplated hereby,
including, without limitation, the reasonable fees and disbursements of counsel
to the Administrative Agent.

                  SECTION 11. Continuing Effect of Credit Agreement. Except as
expressly amended herein, the Credit Agreement shall continue to be, and shall
remain, in full force and effect in accordance with its terms.

                  SECTION 12. Governing Law; Counterparts. THIS AMENDMENT AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
This Amendment may be executed by the parties hereto in any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. The execution and delivery of the
Amendment by any Lender shall be binding upon each of its successors and assigns
(including Transferees of its commitments and Loans in whole or in

<PAGE>


                                                                               4



part prior to effectiveness hereof) and binding in respect of all of its
commitments and Loans, including any acquired subsequent to its execution and
delivery hereof and prior to the effectiveness hereof.

                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.


                                U.S. OFFICE PRODUCTS COMPANY


                                By: /s/ Thomas Morgan
                                    -----------------------------------------
                                    Title: President And Chief Executive
                                           Officer


                                BLUE STAR GROUP LIMITED


                                By: /s/ Eric Watson
                                    -----------------------------------------
                                    Title: Chief Executive Officer


                                THE CHASE MANHATTAN BANK, as
                                Administrative Agent, Swing Line Lender, Issuing
                                Lender and Lender


                                By: /s/ William J. Caggiano
                                    -----------------------------------------
                                    Title: Managing Director



<PAGE>


                                                                               5



                                BANKERS TRUST COMPANY, as Syndication
                                Agent and Lender


                                By: /s/ Patricia Hogan
                                    -----------------------------------------
                                    Title: Principal

                                MERRILL LYNCH CAPITAL CORPORATION,
                                as Documentation Agent and Lender


                                By: /s/ Illegible
                                    -----------------------------------------
                                    Title: Director

                                BARCLAYS BANK PLC


                                By:
                                    -----------------------------------------
                                    Title:

                                BANK OF AMERICA NATIONAL TRUST &
                                SAVINGS ASSOCIATION


                                By: /s/ Illegible
                                    -----------------------------------------
                                    Title: Vice President


                                CITICORP USA, INC.


                                By: /s/ Carla Devillers
                                    -----------------------------------------
                                    Title: Attorney-in-fact


                                BHF - BANK AKTIENGESELLSCHAFT


                                By: /s/ John Snyder
                                    -----------------------------------------
                                    Title: Vice President


                                By: /s/ Thomas J. Sachs
                                    -----------------------------------------
                                    Title: Assistant Vice President


<PAGE>


                                                                               6






                                NATIONSBANK, N.A.


                                By: /s/ Michael R. Haridin
                                    -----------------------------------------
                                    Title: Senior Vice President

                                THE BANK OF NEW YORK


                                By: /s/ Ronald R. Ready
                                    -----------------------------------------
                                    Title: Vice President

                                GENERAL ELECTRIC CAPITAL
                                CORPORATION


                                By:
                                    -----------------------------------------
                                    Title:

                                NATIONAL BANK OF CANADA, A
                                CANADIAN CHARTERED BANK


                                By: /s/ Illegible
                                    -----------------------------------------
                                    Title: Vice President

                                By: /s/ Illegible
                                    -----------------------------------------
                                    Title: Vice President/Manager 

                                SOUTHERN PACIFIC BANK


                                By: /s/ Cheryl A. Wasilewski
                                    -----------------------------------------
                                    Title: Vice President



<PAGE>


                                                                               7




                                CREDIT AGRICOLE INDOSUEZ


                                By: /s/ Craig Welch
                                    -----------------------------------------
                                    Title: First Vice President

                                By: /s/ Rene Le Blanc
                                    -----------------------------------------
                                    Title: Vice President, Team Leader

                                FIRST UNION NATIONAL BANK


                                By: /s/ Joan Anderson
                                    -----------------------------------------
                                    Title: Vice President

                                THE MITSUBISHI TRUST & BANKING
                                CORPORATION


                                By:
                                    -----------------------------------------
                                    Title:

                                CITY NATIONAL BANK


                                By:
                                    -----------------------------------------
                                    Title:

                                CHIAO TUNG BANK CO., LTD., NEW YORK
                                AGENCY


                                By: /s/ Kuang-Si Shiu
                                    -----------------------------------------
                                    Title: Senior Vice President &
                                           General Manager




<PAGE>


                                                                               8




                                HELLER FINANCIAL, INC.


                                By:
                                    -----------------------------------------
                                    Title:

                                ERSTE BANK DER OESTERREICHISCHEN
                                SPARKASSEN


                                By:
                                    -----------------------------------------
                                    Title:

                                By:
                                    -----------------------------------------
                                    Title:

                                HIBERNIA NATIONAL BANK


                                By: /s/ William P. Herrington
                                    -----------------------------------------
                                    Title: Senior Vice President

                                THE SAKURA BANK LIMITED


                                By:
                                    -----------------------------------------
                                    Title:

                                FIRST COMMERCIAL BANK, NEW YORK


                                By: /s/ Vincent T.C. Chen
                                    -----------------------------------------
                                    Title: Senior Vice President 
                                           and General Manager  

                                NATIONAL CITY BANK




<PAGE>


                                                                               9


                                By: /s/ Illegible
                                    -----------------------------------------
                                    Title: Vice President

                                SANWA BUSINESS CREDIT CORPORATION

                                By: /s/ Peter L. Skavla
                                    -----------------------------------------
                                    Title: Vice President

                                THE SUMITOMO BANK, LIMITED

                                By: /s/ John C. Kissinger
                                    -----------------------------------------
                                    Title: General Manager

                                BANKBOSTON, N.A.


                                By:
                                    -----------------------------------------
                                    Title:

                                IMPERIAL BANK, A CALIFORNIA BANKING
                                CORPORATION


                                By: /s/ Ray Vadalma
                                    -----------------------------------------
                                    Title: Senior Vice President






© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission